Monday, December 14, 2015

Mozambique raises rate 150 bps as inflation jumps

Mozambique's central bank raised its benchmark standing facility rate by a further 150 basis points to 9.75 percent with immediate effect, citing the behavior of inflation and the exchange rate of the metical, which exceeded forecasts and would impact the objectives for 2015 and 2016.
The Bank of Mozambique (BM), which has now raised its rate by 225 basis points this year, added it was also raising its deposit rate by 100 basis points to 3.75 percent while the reserve requirement, which was raised in November, was maintained at 10.50 percent.
The central bank will intervene in markets to meet its target for the monetary base in December of 69.850 billion meticais, up from 65.802 billion in November.
The base in November was affected by the simultaneous increase of a 1.1914 billion increase in currency in circulation and a 3.572 billion increase in bank reserves, BM said, adding that the rise in November on an annual basis was 21.3 percent, or 11.5594 billion.
The central bank said the international economic environment continues to point to uncertainty regarding the recovery of the global economy along with the continued fall in the prices of goods the affect the country's payments along with the stronger dollar.
On Dec. 1 Ernesto Gov, central bank governor, told reporters that the fall in the metical was due to depressed commodity prices, which has raised concern over rising government debt. Mozambique's main exports are natural gas, coal, cotton and aluminum.
Mozambique's inflation rate rose to 6.27 percent in November from 4.74 percent in October while the metical fell sharply earlier this month though the BM said information from commercial banks as of Dec. 11 "point to a slowdown in the depreciation of the metical," with the currency quoted at 51.13 to the dollar for an annual depreciation of 49.6 percent.
The metical was quoted at 51.3 to the U.S. dollar today while the central bank said on the Interbank Foreign Exchange Market (MCI) it was quoted at 54.06 on the last day of November for an annual depreciation of 73.2 percent.
Mozambique's Net International Reserves fell to US$207 million to US$1.948 billion, enough for 3.31 months of imports, reflecting net foreign currency sales by the central bank of $113 million, payments abroad by the state of $19.7 million and net losses from the gold and bonds worth $14.2 million.
These changes were cushioned by purchase of foreign exchange worth $29.1 million, disbursement of foreign aid for state projects of $20.5 million and deposits of commercial bank at BM to meet overseas operations worth $6.5 million.
The BM said the INE business confidence indicators again fell in October, reflecting negative opinions about job prospects, demand and prices, with all sectors apart from industrial production and housing expressing pessimism about the future.